Tuesday, April 30, 2013

CFTC holds Twitter #HackCrash hearing tomorrow

It was one week ago this Tuesday that a hacked AP account tweeted, ?Breaking: Two Explosions in the White House and Barack Obama is injured? to its 1.9 million followers.

Moments later, the @AP twitter handle released a statement saying they had been hacked and that President Obama was fine, but the markets had already reacted. The Dow Jones Industrial Average plummeted 150 points and lost $136 billion in value before rebounding.

The Syrian Electronic Army, a group that backs Syrian President Bashar al-Assad and attacks western media for what they believe to be unfair coverage of the country's ongoing conflict, has taken responsibility for the hack.

The U.S. Commodity Futures Trading Commission is investigating the Twitter hoax and will hold a panel discussion on ?market issues resulting from the April 23 twitter attack? at tomorrow?s pre-scheduled CFTC technology meeting.

The CFTC?s technology committee is made up of bankers, scholars, and traders who, according to The New York Times, are looking at 28 different futures contracts to determine exactly how the AP?s erroneous tweet impacted markets.

While the CFTC has indicated that high frequency trading played a big part in the flash crash that followed the twitter hack, The Daily Ticker?s Henry Blodget disagrees. ?The problem here is not the high frequency traders, that?s a different discussion,? Blodget says.

In the United States, Blodget explains, hacking a Twitter account is still considered a harmless prank. ?This is serious. We live in an information economy, huge dollars are tied to it and it should be treated as such,? he says.

The Daily Ticker?s Aaron Task believes that the CFTC should be speaking with Twitter representatives, not just traders. ?Now that the SEC is allowing public companies to make these announcements on social media platforms, it does raise the possibility that somebody else?s account gets hacked and publically traded information gets out there that?s just all wrong,? Task says.

?It will,? confirms Blodget. ?It?s definitely going to happen.?

In the wake of the AP scandal, Twitter is reportedly testing a two-step security verification process that will make it more difficult for hackers to take over accounts.

Still, ?no system is unhackable,? says Blodget. ?This will continue to happen.?

Rationalizing the hack, Blodget claims that news and misinformation leaks occurred long before Twitter and they will continue no matter what security measures are put into place-- markets understand this.

?It doesn?t need to be this national crisis,? says Blodget.

Still, ?it absolutely does need to be taken extremely seriously when somebody does something that in certain communities might be considered a prank that actually has serious impact on markets and the economy and corporations,? he says.

You can contact the reporter on Twitter: @NicoleGoodkind.

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